Ally Financial has scrapped its previously announced $2.65bn acquisition of Cardholder Management Services (CardWorks), a US-based consumer finance lender and servicer, owing to the ongoing Covid-19 pandemic.
The parties have mutually agreed to terminate the deal, which was signed in February 2020 after taking into consideration the considerable impacts of the pandemic on global markets and also on the economy.
Neither of them will have to pay any termination or break-up fees to the other following the scrapping of the deal.
Ally Financial CEO comments on scrapping the deal with CardWorks
Ally Financial CEO Jeffrey Brown said: “Given the unprecedented economic and market conditions resulting from the COVID-19 global pandemic, Don Berman and I, along with our boards of directors, believe it is in the best interests of our customers and stakeholders to terminate the agreement.
“This was a difficult decision to make following a long process to bring two strong companies together. I want to express my deep appreciation for the considerable efforts and incredible commitment demonstrated by Ally and CardWorks employees.”
Based in Michigan, Ally Financial is a digital financial-services company. It is engaged in offering a range of financial services and insurance products to automotive dealerships and consumers.
The company pursued the acquisition to further diversify its product offerings by adding a credit card platform, and a range of servicing and recovery operations and a nationwide merchant acquiring business.
As per deal terms, Merrick Bank, a fully-owned subsidiary of CardWorks was to merge into Ally Bank, the online banking subsidiary Ally Financial.
The consumer finance lender and servicer was to receive nearly $1.35bn in cash and $1.3bn in Ally Financial’s common stock, equating to 39.5 million shares.
CardWorks, which was founded in 1987, is a servicer of nationally-branded MasterCard/Visa cards, secured cards, private label cards, and other products, and also secured and unsecured installment loans.
On the other hand, Merrick Bank is an issuer of Visa-branded credit cards apart from offering finance options to consumers via marine and recreational vehicle dealers across the US.
